The South African property industry is calling on President Cyril Ramaphosa to address the anomaly or ambiguity around, and give some clarity on, the new Expropriation Act, in his State of the Nation address tonight.
In response to Independent Media Property, South African Property Owners Association (SAPOA), the local commercial and industrial real estate sector representative association’s CEO Neil Gopal, said this will calm the markets and investors.
He said while land reform remains a crucial national imperative, the new Expropriation Act introduces significant risks that could undermine property rights, deter investment, and create economic uncertainty.
“There is a lack of clarity under which circumstances it would be just and equitable to pay nil compensation. These circumstances are not carefully circumscribed,” Gopal said.
SAPOA said the contention that where land is held for purely speculative purposes, it could be expropriated for nil compensation.
The organisation said the investment in land so as to generate a capital profit is common and is part and parcel of normal activities within the property sector.
“There seems to be no reason why land held for so-called speculative purposes would qualify for expropriation for nil compensation.
“There are many landowners whose sole purpose of business is to speculate in land. They do not get the land for free and they have significant holding costs. It seems irrational to indicate, in these instances, the expropriation should qualify for nil compensation. This introduces uncertainty that will affect investor confidence.”
Gopal said a buy-and-hold strategy is an internationally recognised real estate investment approach. “No one buys land and holds it for nil value. If so, it will disrupt property market fundamentals and also disrupt capital flows and capital markets.”
He said developers need long-term certainty before committing to major projects. “If they feel there’s a risk of losing their investments due to unclear expropriation laws, they will take their capital elsewhere.”
The CEO said if the President addresses this, it would calm the storm surrounding the Act’s recent signing.
Deon can Zyl chairperson for the Western Cape Property Development forum warned the President: "We note that SONA takes place in context of the coalition government with parties having agreed to work together but not necessary aligned on policy concepts. The property industry requires line of sight on the future and certainty about the future policy context.
“We trust that the President will give clarity and certainty on policy so that the fixed-capital industry can make informed decisions on whether to invest in the country. The industry needs line of site on the future."
Real Estate Business Owners of South Africa (REBOSA), which represents business owners and principals of estate agencies operating the local residential real estate sector, said the signing of the expropriation legislation caused uncertainty and anxiety and had an impact even in the United States thanks to President Donald Trump.
The organisation’s CEO Jan le Roux said a lot depends on the interpretation of the legislation and how the President sees this unfolding. “Any threat to property rights is negative for the property sector,” Le Roux said.
SAPOA said they believe another matter that is critical to the successful functioning of the property sector which will ensure significant growth, was that the rapid pace at which some municipalities are deteriorating, threatening to undermine investor confidence and hinder the growth of the commercial and industrial real estate sectors.
“The state of municipal governance has become a key concern as property owners and investors face mounting costs for basic services, including electricity and water, often necessitating private solutions such as solar panels and diesel generators.”
Gopal said that additionally, increasing security costs and the rise of illegal street vendors are further eroding the investment climate, particularly in urban centres such as Johannesburg.
He said these include the unsustainable increase in municipal charges, escalating property rates, decaying infrastructure worsened by crime and sabotage, and the persistent water shortages and energy crisis.
“These ongoing issues not only strain the financial viability of property owners but also create an environment of uncertainty that could drive investment away from South Africa’s real estate market.
“Developers need long-term certainty before committing to major projects. If they feel there’s a risk of losing their investments due to unclear expropriation laws, they will take their capital elsewhere ” Gopal said.
Another issue that REBOSA said affects the property sector and it will be most helpful if the President could provide some comfort was that the creation of the government of national unity brought some stability to the political scene and the prolonged cooperation of centrist parties had and will have a positive impact on the property sector. “Much depends on how the President is seen managing the differences between the participating parties.”
Seeff Property Group chairman Samuel Seeff said they hoped the president would through his SONA improve services, cutting corruption, and a strong focus on reforms aimed at boosting investment, economic growth and job creation. “These imperatives are now at a critical level,” Seeff said.
The real estate agency said the high interest rate has been too high for too long, and “we would like to see it come down by at least a further 100bps, and for the cuts to be faster so as to have a real impact on the economy and property market”.
It said the low economic growth and high unemployment is another key factor for the property market. “A good economy will boost the property market leading to higher property taxes for the government, as well as the multiplier economic spin-off benefits for jobs in the property sector, and multiplier economic benefits such as movers, home improvers and services such as decorating, renovations and upgrades, etc.”
Seeff said improved service delivery is vital for metros such as Johannesburg, Tshwane and elsewhere to boost demand for property, and property values.
He said those metros have lagged the Cape in terms of sales volumes and price growth, and while they present excellent opportunities for buyers to get in at flat prices, value growth also needs to be there to entice more buyers and investors, especially at the top end of the market where government makes really good income from high value properties.
He also called for no further hikes in transfer duty, and the exemption threshold needs to be increased from the current level of R1.1 million, as it has not increased for the last two years. “It needs to be at a level to encourage more first-time buyers to get into the property market.”
PROPERTY